With 33 hours to go

The plan, by the most optimistic of scenarios, was for the Senate leaders to reach some kind of fiscal agreement this afternoon, vote on it tonight, and send it to the House for a vote tomorrow. How’s that plan shaping up? Senate Majority Leader Harry Reid (D-Nev.) spoke a few minutes ago on the floor and said the following:

“We have been negotiating now for 36 hours or thereabouts. We did have conversations last night that ended late in the evening between staffs. This morning, we have been trying to come up with some counteroffer to my friend’s proposal. We have been unable to do that. I have had a number of conversations with the President, and at this stage we’re unable to make a counteroffer.

“The Republican leader has told me that – and he’s just said here – that he’s working with the Vice President, and he and the Vice President, I wish them well. In the meantime, I will continue to try to come up with something but at this stage, I don’t have a counteroffer to make. Perhaps as the day wears on, I will be able to. I will say this: I think that the Republican leader has shown absolutely good faith. It’s just that we are apart on some pretty big issues.”

“We are apart” is an excellent three-word summary. By any fair estimate, Reid, Senate Minority Leader Mitch McConnell (R-Ky.), and their aides have worked aggressively since Friday night, but the predictable obstacles are proving to be intractable. Republicans, at least for now, are simply demanding too much of the Senate majority.

Reid has gone as far as he can, and McConnell either can’t accept Democrats’ offer or can’t muster the votes on the GOP’s side of the aisle (or perhaps both). The two leaders have gone back and forth, but Reid simply has no more counteroffers to present.

What seems to be the trouble? As of this afternoon, McConnell is demanding chained CPI, and wants more tax breaks for the wealthiest of the wealthy through higher estate-tax thresholds. He’s also refusing to include a debt-ceiling increase in the agreement.

Or put another way, in a literal sense, Republicans are holding up middle class tax breaks by demanding cuts to Social Security benefits and a tax break for the top 0.01% of the country – all while laying the groundwork for another hostage crisis in two months.

Reid just can’t go along with this, so the two sides are at an impasse. McConnell has turned to Vice President Biden to see what more can be done, but at this hour, it does not appear a deal is going to come together. Reid may bring a sensible compromise to the floor later, based solely on what Dems find fair, but by all indications, it would be killed by a Republican filibuster.

McConnell may be playing for time – he may find some new flexibility tonight, if Dems refuse to make additional concessions – but for now, the talks are breaking down. What happens if there’s no additional progress? Then Reid and Senate Democrats will move on to the final contingency plan.

As we discussed yesterday, if all else fails, Reid will bring a simple package to the floor tomorrow: lower rates on income up to $250,000 and extended jobless aid. That’s it. If Senate Republicans kill it, the deadlines will pass and Democrats will try again in 2013. If the Senate passes it and the House balks, we’ll see the same outcome.

I’ll have another post this evening, updating readers on where things stand.